PARIS — LVMH Moët Hennessy Louis Vuitton is not necessarily the “safe haven” investors see it as, HSBC analyst Antoine Belge wrote in a research note Thursday.
While the company was exceptionally resilient during the 2008-2009 slump, Belge’s chief concern is that despite the strength of Louis Vuitton, which he estimates represented 52 percent of the group’s 2011 operating profit, the company’s other activities, notably cosmetics and fragrances as well as wines and spirits, could potentially see weak business in 2012.
“LVMH holds more than 60 brands, most of which have lower return on invested capital and higher risk profiles than star brand Louis Vuitton,” he wrote.
The analyst predicts that LVMH will report 2011 revenues of 23.6 billion euros, or $30.19 billion at current exchange, representing year-on-year growth of 2 percent, and earnings before interest and taxes of 5.3 billion euros, or $6.78 billion, up 3 percent, when it publishes its results on Feb. 2.
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For 2012, he predicts 26.4 billion euros or $33.77 billion, in sales and 5.95 billion euros, or $7.61 billion, in EBIT.
“We currently see higher potential returns elsewhere in the sector (notably at Richemont and Swatch),” he said.
HSBC maintained its neutral valuation on LVMH shares, increasing its target price per share from 115 euros, or $147.11, to 127 euros, or $162.47.
“We think LVMH could prove to be a defensive relative play in the global economic recession scenario, but HSBC is not that pessimistic for global GDP,” Belge affirmed.